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International Medical Group, Inc. v. American Arbitration Association

December 03, 2002


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 00 C 1020--Sarah Evans Barker, Judge.

Before Rovner, Diane P. Wood and Evans, Circuit Judges.

The opinion of the court was delivered by: Rovner, Circuit Judge


International Medical Group, Inc. ("IMG") and Sirius International Insurance Corporation ("Sirius") were so displeased at being drawn into an arbitration proceeding that they sued not only the claimant who drew them in but his lawyers, their law firm, the American Arbitration Association ("AAA") and a few hapless employees of the AAA. After this Indiana state court proceeding was removed to federal court, the district court dismissed the complaint, in part for lack of personal jurisdiction over most of the defendants and in part because of arbitral immunity, failure to state a claim upon which relief can be granted, and because AAA had been improperly joined. IMG and Sirius appeal and we affirm.


Michael Ogdon, a citizen of Great Britain and resident of Florida, purchased a health insurance policy from Sirius in late 1998. Sirius, a Swedish corporation, designated IMG, an Indiana company, as the policy admini strator and general underwriter. In January 1999, Ogdon received emergency medical treatment at a Florida hospital and subsequently submitted bills totaling approxi mately $10,000 to IMG as plan administrator. IMG inves tigated the claim and refused to pay any of the bills on the ground that all of the charges related to a pre-existing condition that was not covered by the policy. Ogdon filed a complaint with the Indiana Department of Insurance, alleging that his illness was not a pre-existing con dition at the time the policy was issued and that denial of his claim was improper, pretextual and in bad faith. The record does not reveal how or whether the Indiana Department of Insurance resolved that claim, but eventually Ogdon requested cancellation of the policy and a return of his premium. IMG obliged by cancelling the policy as of February 25, 2000 and returning a pro rata share of the premium Ogdon had paid for the policy.

In the meantime, Ogdon, through his attorneys (Hilda Piloto and Juan Rodriguez of the firm Rodriguez & Machado, P.A.) filed a Statement of Claim and a Demand for Arbitration ("Demand") with the AAA in Miami, Florida. The insurance policy provided that certain disputes under the policy would be subject to arbitration:

If any dispute shall arise as to the amount to be paid under this insurance (liability being otherwise admitted), such dispute shall be referred to arbitration in accordance with procedures of the American Arbitration Association. Where any dispute is by this provision referred to arbitration, the making of an award shall be a condition precedent to any right of action against the Company. R.1, Complaint, Ex. B, ¶ 16.

The Demand named both IMG and Sirius as respondents. According to the Demand, Ogdon purchased insurance from Sirius, and IMG was the plan administrator. The Demand stated that IMG and Sirius had wrongfully refused to pay out Ogdon's claim. The AAA assigned Janella Brown as the case manager. Brown worked in the AAA's Southwest Case Management Center in Atlanta, Georgia, a facility that administered arbi trations that take place in Miami, Florida. On March 17, 2000, Brown sent a letter to Thomas Dawson, a New York lawyer that Ogdon had identified as the representative for IMG and Sirius. The letter informed Dawson that Ogdon had made a demand for arbitration, and set out preliminary procedural matters. R. 1, Complaint, Ex. H.

Dawson forwarded the letter to F. Jonathon Zusy, the general counsel for IMG located in Indiana. Zusy responded to Brown's letter on behalf of both IMG and Sirius, denying that the arbitration was authorized by the insurance contract and declining to provide any of the information requested by the AAA. He explained that the contract provided for arbitration only if liability had been admitted, and that IMG and Sirius had never admitted liability. Zusy objected to an arbitration being held in Florida or anyplace else and asked the AAA to cancel the arbitration. R. 1, Complaint, Ex. I. Brown replied by a letter addressed to Ogdon's lawyers and Dawson. *fn1 She requested that Ogdon respond to Zusy's letter by April 4, 2000. R. 1, Complaint, Ex. J. When Ogdon did not respond, Brown sent a letter to both Ogdon's counsel and Zusy stating that Ogdon had met the filing requirements of the AAA's rules and therefore the AAA intended to go forward with the arbitration:

Accordingly, in the absence of an agreement by the parties or a court order staying this matter, the Association will proceed with further administration. The parties may wish to raise this issue with the arbitrator at or prior to the hearing. R. 1, Complaint, Ex. L.

Zusy sent another letter reiterating the positions previously taken by IMG and Sirius. R. 1, Complaint, Ex. M. Ogdon's lawyers stated their belief that the dispute was subject to arbitration. R. 1, Complaint, Ex. Q. Brown wrote another letter to the parties indicating that the AAA had reviewed the various positions of the parties regarding the arbitrability of the matter and had concluded that the arbitration would proceed absent an agreement by the parties or a court order staying the proceedings. R. 1, Complaint, Ex. R. Brown repeated that the AAA could not determine issues of arbitrability and informed the parties that the arbitrator had the power to determine the existence or validity of a contract of which an arbitration clause forms a part. R. 1, Complaint, Ex. R.

Shortly thereafter, IMG and Sirius filed suit in Indiana state court, requesting a stay of the arbitration proceeding and seeking a declaratory judgment clarifying the rights and obligations of the parties under the insurance contract. They alleged abuse of process, malicious prosecution and bad-faith arbitration. Their ex parte request for a temporary restraining order was granted. The state court later granted Sirius and IMG's request for a preliminary injunction and entered findings on several of the matters raised in the request for declaratory relief. The AAA suspended the arbitration on learning of the state court's order. Ogdon, Piloto, Rodriguez, and the firm of Rodriguez & Machado, P.A. (collectively the "Non-AAA Defendants") removed the state court lawsuit to the federal district court. Sirius moved to dismiss all of the claims it raised against the AAA, Brown and her supervisor, John Germani (collectively the "AAA Defendants"). The district court granted that motion.

All of the defendants then moved to dismiss the remaining claims under Rules 12(b)(2) and 12(b)(6). The district court dismissed the claims against Brown and Germani, the AAA employees, because their contacts with the State of Indiana were insufficient to confer personal jurisdiction. In particular, Germani had no contacts with Indiana at all and had merely advised Brown on how to proceed with the arbitration. Brown's only contacts with Indiana were the five letters she mailed to Zusy after Zusy insisted that all mail pertaining to the arbitration be sent to him rather than to Dawson, Sirius's registered agent in New York. The court noted that all of the correspondence related to a quasi-legal proceeding that was never intended to occur in Indiana. The court concluded that ...

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